This column is dedicated to those who seek to establish and manage a successful ad agency.
There are over 18,000 advertising agencies in the United States today employing in excess of 200,000 people working in agencies throughout the country. Unfortunately, very few of those agencies achieve real success in terms of client service, agency growth and consistent profitability. If there were a guaranteed formula for success in the agency business, there would be many more happy people in the industry today. There does appear, however, a few fundamentals which I refer to as “basics” that seem to work, as I observe and evaluate a few successful ad agencies in the Mid-Atlantic region. These day-to-day basics are essential for growth and success that appear to be common to most of them. Here are just a few of them:
- Have a financial expert on board
No successful ad agency has grown and prospered without a good financial expert on the executive team. One of the weaknesses in many small-to-medium-size agencies is in their accounting and financial operations. Most agencies are started and run by creative or marketing people, not financial experts. My experience tells me that you fall short literally, without financial expertise, supplemented with a good outside CPA firm and / or even, consider adding to your executive team or board of directors an outside member with financial experience. And yes, one can obtain / learn agency financial expertise over time or by “trial & error”, “deep pockets” or good credit with a local bank or financial institution.
- Be a business
Most successful advertising agencies, including those with great creative reputations, are run in a business-like manner. Ad agencies, like their clients, need cash flow policies, purchasing, fiscal jurisprudence, subcontracting and billing practice systems, standard operating systems, employee policies, compensation systems, standard industry practices, a code of behavior, business ethics, etc. Profit-sharing is a nice added-plus. There is simply no evidence that the sheer gratification of turning out, so-called “creative advertising,” by your creative team succeeds in the long run. Even creative people must have or possess some financial stability.
- Be best at something
Small agencies. Big agencies. New agencies. Old agencies. All try to be best at something. Trying to be everything to everybody is one of the quickest ways to failure. Building a specific brand…a personality, character and image, is one of the basics that appears to be part of the success of the top agencies in the country.
- Exert strong leadership at the top
All successful agencies have strong leadership at the top. Those agencies reflect a point-of-view and a lifestyle of a relatively small group of key executives. This core group of one or two or three or four people sets forth the pattern, the philosophy, the policies, which gives an agency momentum and sets the pace for everybody else. As agencies grow naturally, assumption of responsibility and delegation of authority takes place.
- Plan for permanency today
Industry studies bear out the fact that many agencies fail because there was no plan for succession. Top managers should plan for the permanency of their agency today. Those plans must include how the principals are going to get their money out of the business, who’s going to take their places, and when it will happen.
- Develop a growth plan
Agencies grow through increased client budgets, new business, and / or through mergers and acquisitions. Responsible agency managers should develop the growth plan they believe will accomplish the objectives of the management and principal shareholders. More and more agencies are also going the merger and acquisition route. This is terribly time-consuming, but my experience indicates that there is much to be gained / learned from occasional merger discussions with other agencies.
- Restrict new business efforts
Pursue only those accounts you feel you can handle well. Seek the type of clients you are most qualified to handle. Constantly ask yourself the question: “If I were the client, would I hire us?” Having the courage to say “NO” to new business opportunities is a lesson most agencies never learn. “Know thyself”…your strengths, weaknesses, capabilities and limitations. Stay away from soliciting firms whose decisions have historically been made or governed by politics. It pays and time is money. Follow-up by reading my earlier Capitol Communicator column, entitled Selecting An Advertising Agency or PR Client Is Not Easy, for more further details and factors to consider.
- Use your own product
I find that very few agencies invest in their own product when promoting themselves. Sure, most agencies send out an occasional email, occasional letter or direct mail piece, but that’s about all. At my old agency, LMO Advertising, we ran an ad the day we opened for business and had advertised consistently for a number of years since then. According to the 4A’s, investing a percentage of agency income annually in self-promotion is a smart thing to do. Our new business experience, our own agency recognition and image research indicates that investment paid off well for us. Agencies should use their own product. Who knows…they may learn something about advertising. And they will surely turn up some new business leads, too.
- Plan the work – work the plan
Our observation of successful agencies suggests that another “basic” that seems to work is to “plan the work and work the plan.” We used management-by-objective(s) and we’ve had a long-range planning committee since early 2000. We thought planning worked for us as well as for our clients. Most agencies tend to have frantic work environments where seemingly, “the business runs the people – the people don’t run the business.” Proper planning is the only answer.
- Avoid “management incest”
In a personal service business, such as ours, most successful ad agencies tend to be run by “nice guys” who like each other, who like to do the same things, who think pretty much alike. Perhaps, the smartest thing to do is to have an outside member (or two) on our board of directors or executive team. An outside director or team member can bring to the agency objectivity and a perspective that is invaluable as the agency analyzes its performance and charts its future growth plans. It’s worth your trouble to avoid “management incest.”
- Recruit and retain good people
Recruiting and retaining good people is not an easy proposition and takes close scrutiny and good management. For entry level types, we have recruited excellent people through job work sites, or better yet, we have “grown our own” through our wonderful internship program. When it comes to the more experienced agency personnel, we find that online job work sites to be very effective in generating good prospect leads for follow-up. When and if all else fails, we use “headhunters,” to a limited extent. Employee referrals are also used for positions, who are hired after passing our “litmus test,” carry an incentive for the employee. Per the industry standard, newly-hired employees are subject to a drug test and background investigation. Our all-exclusive benefits program serves as a solid retention addition for each employee inclusive of medical, dental, 401K, liberal vacation, profit-sharing, holiday and incentive bonuses, maternal and sick leave policies. We also staunchly believe in giving our employees the tools and resources necessary to do their jobs, allow them to attend all-expenses paid, selected agency professional growth seminars and conferences, and lastly, we pay our employees very well.
While I am not recommending strict adherence to the aforementioned basics, I know they work well for my agency and serve in the elimination of business problems, while enhancing and increasing agency growth, staff retention and dedication. I also believe that these basics, with close application, are a good way to increase positive awareness and promote agency brand image awareness, recognition, and profitability. Lastly, but by no means least, our continued success and survival is attributed primarily to our policy of diversity, equity and inclusion.
Ron Owens is President, Ron Owens & Associates, which specializes in market development, branding, diversity, equity and inclusion. Ron is a Co-founder & former Principal of LMO Advertising. He also served as Director, Worldwide Advertising & PR, Pitney Bowes, Inc., a Fortune 500 Company; VP, Bozell Worldwide; VP, TMP Worldwide; Past President, Ad Club of Washington DC; Governor, 4A’s, Region II; Committee Chair, ANA; Lt Gov, AAF, Region III and Vice Chair, Better Business Bureau. Ron can be reached via [email protected]